Business index at post-lockdown high but beware of ‘faux recovery’: Nomura


MUMBAI: Financial services company Nomura on Monday cautioned about a ‘faux recovery’ being reflected by various indicators which is limited to festive consumption even as the Nomura India Business Resumption Index (NIBRI) picked up sharply to a post-lockdown high of 82.2 for the week ending 18 October versus 80.8 in the previous week led by improvement in mobility indices.

It said that though business resumption has picked up, one needs to be aware of the mobility illusion and that sharp improvement in workplace mobility masks sluggishness in other components of the index.

Nomura attributed “much of this improvement” to a sharp rise in Google workplace mobility (by around 5pp from the previous week), as well as an improvement in retail & recreation mobility (by 3.6pp), while the Apple driving index remained largely stable.


However, the labour participation rate inched lower to 40.3% from 40.6% in the previous week and power demand contracted over the week but improved to -0.8% vs -1.9% in the previous week, it said.

“The onset of the festive season carries two risks for business resumption,” Nomura said.

First, the improvement in the NIBRI and in other monthly indicators may be reflecting a ‘faux recovery’ limited to festive consumption.

Various indicators such as India’s Purchasing Managers’ Index, goods and services tax collections, e-way bills, railway freight loading, highway toll collections, power demand and exports are pointing to an economy on the mend after a record contraction of 23.9% in the June quarter. The contraction in factory output too has been slowing.

The second reason, as per Nomura, is while the pandemic curve is slowly flattening, there is a risk of cases picking up again during the festive season.

“The underlying weakness in the labour market is worrying as it reflects continued pressure on household incomes, which can be a medium-term headwind for consumer demand,” it said

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